Correlation Between Amazon and SILICON LABORATOR
Can any of the company-specific risk be diversified away by investing in both Amazon and SILICON LABORATOR at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Amazon and SILICON LABORATOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and SILICON LABORATOR, you can compare the effects of market volatilities on Amazon and SILICON LABORATOR and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Amazon with a short position of SILICON LABORATOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and SILICON LABORATOR.
Diversification Opportunities for Amazon and SILICON LABORATOR
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and SILICON is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and SILICON LABORATOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILICON LABORATOR and Amazon is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Amazon Inc are associated (or correlated) with SILICON LABORATOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILICON LABORATOR has no effect on the direction of Amazon i.e., Amazon and SILICON LABORATOR go up and down completely randomly.
Pair Corralation between Amazon and SILICON LABORATOR
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.56 times more return on investment than SILICON LABORATOR. However, Amazon Inc is 1.8 times less risky than SILICON LABORATOR. It trades about 0.13 of its potential returns per unit of risk. SILICON LABORATOR is currently generating about 0.07 per unit of risk. If you would invest 16,908 in Amazon Inc on October 25, 2024 and sell it today you would earn a total of 5,502 from holding Amazon Inc or generate 32.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. SILICON LABORATOR
Performance |
| Timeline |
| Amazon Inc |
| SILICON LABORATOR |
Amazon and SILICON LABORATOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and SILICON LABORATOR
The main advantage of trading using opposite Amazon and SILICON LABORATOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, SILICON LABORATOR can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SILICON LABORATOR will offset losses from the drop in SILICON LABORATOR's long position.| Amazon vs. Altair Engineering | Amazon vs. Gaming and Leisure | Amazon vs. Playtech plc | Amazon vs. Eidesvik Offshore ASA |
| SILICON LABORATOR vs. Apple Inc | SILICON LABORATOR vs. Apple Inc | SILICON LABORATOR vs. Apple Inc | SILICON LABORATOR vs. Apple Inc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.
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